1. Technical Field
The present disclosure relates to the secondary gift card marketplace and more specifically to tracking and aggregating information about the secondary gift card marketplace, and identifying fraudulent transactions in the secondary gift card marketplace.
2. Introduction
Gift cards and gift codes are widely used as gifts for birthdays, Christmas, and other holidays. Gift cards and gift codes are closed loop, meaning that the value represented by a gift card or gift code is a valid form of payment at a closed set of retailers. For example, an Outback Steakhouse® gift card/code is only redeemable at Outback Steakhouse® and not at Planet Hollywood® or Target®. Some closed loop cards and codes are valid at a family of closely related or commonly owned merchants. For example, a Darden Restaurants gift card/code is valid at Red Lobster® and Olive Garden®, or a local mall gift card/code is valid at tenant merchants in the local mall. Open loop gift cards (and gift codes), in contrast, are a valid form of payment at virtually every retailer nationwide, such as Visa® or Mastercard® debit cards.
Gift cards/codes are a popular alternative to giving cash or a merchandise item that the recipient may or may not like. However, the recipient may not be able to redeem the gift card/code due to geographic limitations, personal disinterest in the merchant who issued the gift card/code, or other reasons. Additionally, some merchants issue gift cards/codes with significant restrictions, complex fees, and/or an expiration date. According to one estimate, consumers purchase about $80 billion worth of gift cards annually in the U.S. and roughly 10%, or $8 billion, of that amount goes unredeemed. Consumers waste these unredeemed funds and do not benefit from the full value of the gift card/code. Further, if these funds are not spent, they can escheat to the state. Merchants cannot track post-issuance gift card transactions that do not involve the issuing merchant.
Because of this lack of oversight or tracking in post-issuance gift card transactions, fraudsters are naturally attracted to this market. Fraudulent secondary gift card transactions weaken public confidence in the secondary marketplace, incentivize additional fraud, and can potentially cause financial losses for merchants or purchasers of fraudulent gift cards in the secondary marketplace.